The End Game Ep. 58 - Gerard Minack PREVIEW

**Grant Williams** (0:10)
Before we get going, here's the bit where I remind you that nothing we discuss should be considered as investment advice. This conversation is for informational and hopefully entertainment purposes only. So, while we hope you find it both informative and entertaining, please do your own research or speak to a financial advisor before putting a dime of your money into these crazy markets. You're about to listen to a special preview edition of The End Game featuring my co-host, the magnificent Bill Fleckerstein, and our very special guest, the extremely Australian, but nonetheless incredibly smart and entertaining, Gerard Minack. We've been trying to get this episode together for a long, long time. We finally managed to align our diaries, and what follows is a fascinating dig into AI, bond yields, gold, equities, currencies, do you name it, it's all in there with Gerard's trademark insight and humour. You will enjoy this, I guarantee it. Every episode of The Grant Williams Podcast, including The End Game, The Super Terrific Happy Hour, The Narrative Game, This Week In Doom, Shifts Happen, Kaos Theory, and The Hundred Year Pivot is available to Copper and Silver Tier subscribers at my website grantwilliams.com. Copper Tier subscribers get access to all the podcasts, while members of the Silver Tier get both the podcasts and my monthly newsletter Things That Make You Go Hmmm. So, if you enjoyed what you heard on the show, and you'd like more high-quality content like it, then please make your way over to grantwilliams.com and join our excited community today. And now, on with the show.
Gerard Minack, finally, mate, we finally managed to coordinate three, one would imagine, very empty calendars, but it's proved surprisingly difficult to get this sorted out.

**Gerard Minack** (2:04)
It's the nightmare of time zones. I remember getting a phone call from someone in the middle of the night, and they said, oh, I thought you were 24 hours away. I said, no. Finally managed it, partly because I'm here in New York, which makes it all a little bit more easier than when you're in Sydney and trying to coordinate with someone on the West Coast and someone in Europe. So here we go.

**Grant Williams** (2:21)
It's very nice for you to fly all the way to New York just to make the time zone work for us.

**Gerard Minack** (2:24)
I'm here to help.

**Grant Williams** (2:25)
So listen, I guess that makes the perfect idea of where we can start, which is your, because you're in the US seeing clients. Obviously, the US is a focus for a lot of people on what's going on at the moment. What are the kind of the things that are top of mind for all the clients that you're speaking to in the US so far?

**Gerard Minack** (2:38)
There's things that they talk about and there's things that matter. There's always chat now about geopolitics and that sort of thing. But honestly, I don't think anybody makes it operable in their investment decisions. And if you tried to trade on the back of politics or other stuff, you would have got some calls horribly wrong, myself included. If you had said to me at the start of the year, 10-year treasury yield has been trading at a 4-5% range. And in the second half of 25, it's going to break out of that range. But before you say which way, Gerard, up or down, let me tell you a few things that are going to go on. We're going to have inflation that sticks above 3%, with the market expecting it's going to stay there into 2026 We don't have any data at the moment, but the Atlanta Fed is suggesting that third quarter GDP is going to print near 4%. Oh, by the way, we've also introduced the highest tariffs in a century. And just to put the cherry on top of the cake to help you work out which way this yield's gone, the administration's trying to fire a Fed governor. Which way is the yield broken? Up out of the 4-5% range or down? No brainer. Up. Well, wrong. So there's an amazing sense of complacency in pricing. The treasury market is one part of the story. Credit spreads are another. We're talking about cockroaches and how they're really just one of them. And yet, spreads are just off multi-year types. And then you've got equities. Now equities is where a lot of the focus is. And equities at the moment is all about AI. And it's very 1999, not quite as intense as we've chatted. 1999 was a period where investors went truly bananas. And it's worth remembering that the banana cycle was global. Believe it or not, in the last year of the TMT cycle, US equities underperformed. The rest of the world outperformed. And that's because you had things like the COSDAC in Korea, the Neue Markt in Germany, the Mother's Index in Japan. And then when the bubble burst, for the two years as it deflated, US equities actually outperformed because the rest of the world went down faster. Now, the AI thing is much more US centric, but it's sucking in capital. We've got record inflows, foreign inflows into US equities, $600 billion over the 12 months to July. So, this is the big debate. Now, I actually think that investors are making a similar mistake this cycle to what they made in the TMT cycle. Now, the mistake is not about the significance of the underlying technology. Here we are, we're using digital technology. You're in London, flex in the East Coast, I'm in New York, and here we are. It worked, and it's changed things. But the mistake that the market made back in the late 90s was to believe that the business of providing that digital technology would be fantastically profitable. And I'm not the only one to make the analogue. We thought if we're heading into a digital world, surely controlling the digital distribution channels is going to be a great business. The people laying the fibre optics, the people buying the mobile phone spectrum, these are going to be great businesses. Sorry, they turned out to be dunce, they turned out to be commoditised, contestable, and the returns fell way short of expectations.